A senior executive with Beosin, one of China’s leading blockchain security companies, allegedly embezzled cryptocurrencies worth CNY300 million, or about US$45.7 million that were being held by Beosin on behalf of the government, according to reports by two media outlets in mainland China. 

Gao Ziyang, chief marketing officer of Beosin, a blockchain security company based in Chengdu in Sichuan province, allegedly took control of the cryptocurrencies in order to short Bitcoin. The cryptocurrencies were being kept by Beosin for safekeeping for the government after authorities recovered the loot from an unrelated crypto crime late last year.

Gao allegedly used the government-owned crypto to bet against the rise in Bitcoin prices, but he badly misjudged the market direction and lost all the crypto, according to 21 Caijing, a leading financial publication based in Shanghai. 

Beosin did not answer several telephone calls from Forkast.News, including today, to respond to the allegations. Nor did Beosin issue a public statement about the alleged crime. 

Last year, a digital currency exchange called Token Better was found by Chinese police to be involved in a Ponzi scheme. Xiong Bingbing, chief executive of the exchange, was arrested and detained. The illegal cryptocurrencies from the scam totaling about CNY300 million, or about US$45 million were seized by police and given to Beosin in November for temporary safekeeping .

According to Beosin’s website, the company — also known as Chengdu Chain Security Technology Co. — was founded on March 29, 2018, to focus on blockchain security, such as providing security audits, digital asset traceability and anti-money laundering measures. Since then, Beosin has participated in several Chinese government-hosted events, such as co-writing blockchain security standards with China’s Ministry of Industry and Information Technology. Beosin also has helped Chinese internet companies — including Ant Group’s AntChain, Tencent’s WeBank and also crypto exchanges like Huobi — in alerting them to abnormal transactions, reduce malicious actions and enhance their platforms’  security.  

Gao Ziyang is no longer featured on the leadership team page on Beosin’s website, though he did appear with the title of Beosin CMO when he attended an online webinar on March 11 hosted by MXC exchange on Beosin’s approaches to safeguard the security of crypto platforms.

As a rising star in the blockchain industry, Gao was included on the Hurun China Under 30s to Watch 2020 list until at least March 27, 2021, according to Hurun’s web cache. Similar to “Forbes 30 under 30,” the Hurun report is an established publication that features standout professionals in different sectors in China, with “Hurun Rich List” being the best known. As of this publishing date, Gao’s name no longer appears on Hurun’s “Under 30s to Watch” list. 

Gao holds a bachelor’s degree from the Complutense University of Madrid and a master’s degree in law from Guangxi University.

With the sharp rise in prices of Bitcoin and other cryptocurrencies, crypto-related crimes have also been on the rise around the world, especially in the Greater China area. Chinese authorities have uncovered numerous criminal activities related to cryptocurrency across the country. One of the world’s biggest crypto scams, the PlusToken Ponzi scheme, was centered in China. The scam defrauded two million victims out of CNY14.8 billion, or about US$2.25 billion in cryptocurrency, according to the Intermediate People’s Court in Yancheng, Jiangsu. The ringleaders were sentenced to up to 11 years in prison. 

To combat the rise in crypto crimes, the blockchain private sector has also been helping Chinese authorities. Beosin, for example, established a safety monitoring platform to alert the police about suspicious trading and other potentially illegal activity. 

Other examples include Xiamen-based SlowMist, which provides a one-stop blockchain security plan for its customers, and Beijing-based OKLink, which recently launched a cryptocurrency flow tracker to identify potential criminal activities.

“OKLink’s on-Chain Data Analysis tool can analyze the on-chain transfer address, track the transaction status, and have a powerful address label database, using blockchain and big data technology, to assist relevant official departments to crack down on crime,” Jiang Zilong, OKLink’s head of growth, told Forkast.News

OKLink did not receive any government commission to safekeep seized cryptocurrencies, but the company has helped police from around the nation, including Shanxi, Zhejiang, Shanghai, and Sichuan to identify crypto-related crimes and trace the sources of defrauded money, Jiang said. He declined to comment on the Beosin scandal.